France at risk of losing AAA grade

Paris: France risks losing its top AAA grade as Europe’s debt crisis prompts a wave of downgrades that threatens to engulf the region’s highest-rated borrowers, with Belgium also facing a possible cut.

Moody’s Investors Service said on December 15 that it may lower Spain’s rating, citing “substantial funding requirements,” and slashed Ireland’s rating by five levels on December 17.

Standard & Poor’s is reviewing its assessments of Ireland, Portugal and Greece. Costs to insure French government debt rose to a record yesterday with the country’s credit default swaps more expensive than lower-rated securities from the Czech Republic and Chile.

“Every sovereign may get penalised in the year ahead,” said Toby Nangle, who helps oversee $46 billion as director of asset allocation at Baring Asset Management in London. “It would be a big deal if France was to have its AAA rating stripped. I don’t think the likelihood of a downgrade is reflected in the market.”